The core airline business achieved steady passenger
revenues of US$ 4.9 billion and 79% load factors while carrying a record 18.5
million passengers. Available seat kilometres
(ASKs) increased by 9% to 113.9 billion. Yields fell 8% amid market capacity pressures and
the tough global economic climate, but this was partially offset by an 11%
reduction in unit costs.

Total impairments of US$ 1.9 billion included a US$
1.06 billion charge on aircraft, reflecting lower market values and the early
phase out of certain aircraft types. There was also a US$ 808 million charge on
certain assets and financial exposures to equity partners, mainly related to
Alitalia and airberlin.

Legacy fuel hedging contracts also had a negative
bearing on performance in 2016, though this exposure is expected to have less
of a financial impact during 2017.

A slowdown in the cargo market put increased
pressure on cargo revenues and yields, and the airline saw a slight improvement
in freight carried at 595,519 tonnes for the 12-month period.

H.E. Mohamed Mubarak Fadhel Al Mazrouei, Chairman
of the Board of the Etihad Aviation Group, said: “A culmination of factors
contributed to the disappointing results for 2016. The Board and executive team
have been working since last year to address the issues and challenges through
a comprehensive strategic review aimed at driving improved performance across
the group, which includes a full review of our airline equity partnership
strategy.

“The record passenger numbers in 2016 affirm
Etihad’s role as a significant economic enabler for Abu Dhabi, and our airline
business continues to support Abu Dhabi’s vision to develop tourism, grow commerce and
strengthen links to key regional and international markets.”

Ray Gammell, Interim
Group Chief Executive Officer, explained: “We are focused on maintaining the
solid performance of our core airline business – operationally and financially
– even amid difficult market headwinds. At the same time, we continue to
implement changes across the group as part of the comprehensive strategic review,
with a focus on improving revenues and reducing costs.

“During 2016, the
airline commenced a Right Size & Shape programme that generated total
overhead savings of 4% through headcount reductions and other measures by the
end of the year, even as capacity and total passenger number increased.

“This year is just as
challenging for the global aviation industry and the ever-evolving competitive
environment is likely to impact overall performance in 2017. However, our
airline business remains strong and class-leading, and as an aviation group, we
are in a stronger position.”

“Our answer to these challenges is innovation and reinvention, and this
gives Etihad Airways a competitive edge as we seek to leverage opportunities
offered to us by a changing environment.

“Operationally, we performed well in 2016. We maintained load factor
levels even as we increased capacity. Yields were under pressure in all cabins,
with Business Class impacted particularly as corporate travel policies
continued to encourage flyers to downgrade to Economy.

“Our fuel hedging positions,
which helped manage fuel spend during the oil price boom, yet significantly
impacted our cost base last year, will taper during
2017. We are also seeing promising improvements in the contribution made by our
ancillary revenue strategies, and we expect those to offset some of the yield
declines.”